Virtual worlds, massively multiplayer online role-playing games, are quickly becoming more and more popular. Millions of people are spending hours a day in these online worlds. In a survey of nearly 4,000 EverQuest players taken by Edward Castronova in 2001, approximately 20% said that they lived in Norrath, the virtual world of EverQuest, and traveled to Earth regularly. Nearly 40% of those surveyed said that if they could make enough money selling EverQuest items, they would quit their job and devote their time to the EverQuest economy. The average respondent to this survey spent about the same number of hours weekly playing EverQuest as they did at their job. Since 2001, the number of people playing virtual worlds has grown into the millions, which means more and more people are dedicating their time to virtual worlds, and a significant portion of them consider these virtual worlds their home.
All this raises the question, why are people immigrating to virtual worlds? Besides being fun to play in, and hosting a wealth of social interaction, one can now earn a wage in virtual worlds that is above the average hourly wage for many countries by selling game items and currency on secondary markets. Living in a virtual world for many is now not only fun, but also profitable.
Work vs. Play
Warning: I am about to do a shoddy economics thing where we ignore real life and make up models based on the variables we feel like using, and we define those variables in ways that are convenient. Everyone ready? Okay:
An individual’s time can be divided into two categories: work time (w) and play time (p). I could go into what separates work and play, but that is really different for everyone. Lets leave it at this general rule: work you get paid for, play you pay for. From there, you know when you are working and when you are playing. Both work and play confer some level of utility (u) that is unique to that activity and unique for each individual. Utility is loosely defined as the amount of satisfaction, well-being or happiness gained from a good or service. The level of utility conferred by each type of activity is depended on the individual’s circumstances and can depend on anything from the type of work they do, the wage they receive for their work, the type of play activities available to them and their personal tastes. The equation for an individual’s utility can be written as:
where w = hours spent working, u1 = utility from one hour of work, p = hours spent playing, u2 = utility from one hour of play and U = the utility gained from hours w+p. The units for utility are arbitrary, as each individual measures their utility differently, and no two individuals’ utility can’t be reliably compared.
It can be assumed that most individuals will attempt to maximize the utility equation by balancing the labor devoted work time and play time depended on the utility each activity confers.
How Time is Spent
The time spent in virtual worlds has normally been considered play time. The gamer pays a subscription fee for the privilege of spending time in the virtual world. These subscription fees are normally between $10 and $15 monthly. We can assume that because the gamers chooses to spend this money on the game instead of a movie or lunch with a friend, they get more satisfaction out of playing the game than they would out of the other activities they could devote that time and money towards. While in the virtual world they can engage in social activities like chatting, and game activities like hunting monsters or casting spells. Many gamers maintain close friendships through virtual worlds, even romances. Virtual worlds serve multiple roles as both a social forum, and a game. Individuals play these games because they enjoy them. The time spent playing the game comes with a high level of satisfaction. As evinced by the millions of players in virtual worlds, many people find spending time in these virtual worlds more satisfying than spending time in the real world.
It is, of course, a trade-off, the more time spent playing the game, the less time can be devoted to working. One cannot be flipping burgers at a restaurant and be playing EverQuest at the same time. The opportunity cost for playing more EverQuest is not getting the wages one would get if they were working. In exchange for the lower satisfaction that comes from working as opposed to playing, work offers compensation in the form of wage. With wages, gamers can pay to go to virtual worlds in their leisure time. Most people prefer to work as little as is necessary to maintain their standard of living, and devote as much time as possible to the leisure activities that make them happy.
In virtual worlds the line between work time and play time is now being muddled. With the emergence of virtual economies that can interact with Earth economies comes the possibility of having a job in a virtual world that was formerly exclusively dedicated to play. If a player can earn a wage in a virtual world that is comparable to their wage at their Earth job, and their satisfaction from being in the virtual world is higher than their satisfaction from being at their job on Earth, it is only natural that they would dedicate most of their time, if not all of it to virtual worlds. They gain more utility from their time spent there. In 2001 the average hourly wage in Norrath was caculated to be about $3.42. In places like the United States, where the federal minimum wage is $5.15 an hour, a wage of $3.42 is unlivable. However, in places like China, where the number of subscriptions to online games is rapidly growing and the average hourly wage and standard of living is very low, it could make sense for someone to have a job working in a virtual world.
Also, the wage rate in virtual worlds is much higher for players who practice “farming.” Farming is where players repeatedly perform an action in the game, like killing a monster, in order to amass large amounts of rare game items or currency for sale on secondary markets. Farming is much more profitable than normal game play, but not as much fun. Although, sitting in front of your computer with a cold drink is probably much more enjoyable than your typical minimum wage job. So here again, having a job in a virtual world has the potential of conferring more utility to certain individuals.
Recently Julian Dibbell, a respected writer on life in virtual worlds, concluded a year long experiment selling virtual goods. His proposition was thus: “On April 15, 2004, I will truthfully report to the IRS that my primary source of income is the sale of imaginary goods -- and that I earn more from it, on a monthly basis, than I have ever earned as a professional writer.” He ended up making about $47,000. He was $683 short of his goal. Despite this failing, his results where impressive. In fact, $47,000 is well above the $19,157 poverty line for a household with two adults and twp children, and would certainly be a comfortable salary for a single individual. Dibbell often points out in the blog he kept about his forays into virtual economies titled “Play Money”, that these activities are by no means play. “It took work to make Play Money, and the work was hard, and more to the point, the work did not fit any definition of play handed down to us by tradition” he says in his last post. Nevertheless, this kind of work still may be preferable over their Earth jobs to many people.
Risks of Working in a Virtual World
While having a job in a virtual world may enable some individuals to achieve a higher level of total utility than their job on Earth, work in the virtual world comes with risks that are absent in an Earth job. When an individual earns their wage from a virtual world, they are putting your livelihood in the hands of one company. If their servers are down, they loose hours, maybe even days of work time. Also, if the virtual worlds servers are down, it is impossible to access assets stored on that server. Much of the money to be made from virtual worlds involves exploiting software glitches. As soon as the game publisher discovers those glitches, they will be fixed and a new source of income must be found. Many game companies, like Blizzard, the publisher of World of Warcraft, ban accounts that they suspect of farming. Not being able to access the world would be a significant problem if you made your living there. Also, game publishers have the power to change the rules, add new items and character powers, and release expansion packs that add a whole new area with new creatures and items to the world. All these changes can affect the value of formerly acquired virtual assets drastically. In his research, Edward Castronova found that after the release of an EverQuest expansion pack there was market deflation of 29 percent in one year. Prices on items from the expansion pack fell 59 percent over the year, and prices on items from the old world fell 17 percent (p. 35). For an individual making a living off of selling these items, these price reductions would have a serious effect on their income. While the real wage in Norrath went up, the amount of money one could get for an EverQuest item in Earth money went down.
There is also the potential for accounts to be broken into, or hacked by another player. All that stands between hackers and the lucrative accounts of farmers and other people who make a living selling virtual property is a password. There is no way to further protect virtual assets. Because of the nature of persistent-state worlds and the software that runs these worlds, assets cannot be stored on a private, secured server. There is also not much in the way of a security system for these virtual worlds. While there have been court cases in China and Korea that ruled in favor of players who sued game companies for their lost or stolen virtual property, there have been no such law suits as of yet in the United States. Furthermore, law suits take a significant amount of time and money, and there is no guarantee the court will rule in the gamers favor.
As more and more people enter the labor market of a virtual world, the average hourly wage will be pushed down, because the more people farming items, the more items will be available and the less they will be worth. Eventually the utility conferred by working in a virtual world will be equal to the utility conferred by working on Earth, and immigration to virtual worlds will cease for a time.
There are many people who are currently making a living in virtual worlds. The leading secondary market site for virtual goods, IGE.com buys nearly all of the virtual products on its site from independent farmers or farming groups. There are also many smaller auction sites that are managed by the farmers themselves. As Julian Dibbell evinced, a comfortable wage can be made selling items from virtual worlds.
The people who choose to make their living from virtual worlds are those who gain more utility from a job there than they would from a job on Earth. These people most commonly have fairly low wages at their Earth jobs, low enough to make a job in a virtual world with its comparatively low wage rates appealing. They may also prefer the virtual world for other, non-economic reasons. In their situation on Earth it may be impossible for them to better their social or economic position. In virtual worlds however, everyone starts off with roughly the same assets and opportunity, making virtual worlds the ideal place for those who started off disadvantaged on Earth. Many participants maintain close personal relationships in virtual worlds. It makes sense for them to prefer to be where their friends are. For many, there are a multitude of both social and economic reasons for them to immigrate to a virtual world. Despite the risks, many people gain more utility from living and working in a virtual world than they do from living and working on Earth.
Castronova, Edward. (2001). On Virtual Economies. Game Studies. http://www.gamestudies.org/0302/castronova/.
Castronova, Edward. (2001). Virtual Worlds: A First-Hand Account of Market
and Society on the Cyberian Frontier. Social Science Research Network.
Castronova, Edward. (2005). Synthetic Worlds: The Business and Culture of
Online Games. Chicago, IL: University of Chicago Press.
Dibbell, Julian. (2005). Play Money.
Gorman, Stuart. (2005). 18,000 Wow Cheaters Banned. The Inquirer. http://www.theinquirer.net/?article=28534.
US Census Bureau. (2004). Poverty Threshholds 2004.